Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Capital Markets

SK Biopharmaceuticals   / Equity Capital Markets

In this insight, we provide a valuation analysis of <a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966:1" rel="noopener">SK Biopharmaceuticals (BIO SK)</a>.Bullish Case Valuation - If we take a bullish case valuation scenario (for example, assuming the company is able to double its market share from the base case of 462 billion won for Cenobamate to 923 billion won, this would suggest the company's total pipeline market size to increase from 660 billion won to 1.1 trillion won. Applying the same 7.2x EV/pipeline multiple, this would suggest an EV of 8.1 trillion won or implied market cap of 8.0 trillion won (102,000 won per share in implied price).We can also use the recent share price movement of <a href="https://www.smartkarma.com/entities/sk-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:393:1" rel="noopener">SK Holdings (034730 KS)</a> as a guide to the potential implied market cap of SK Biopharm by backtracking the increase in the market cap of SK Holdings in the past few weeks. <div class="content-highlight">
Although SK Holdings has numerous moving parts (including its holdings in SK Telecom and SK Innovation), clearly the dominant factor impacting SK Holdings has been SK Biopharm. If we take the case that about half of the increase in the value of SK Holdings since 19 May has been due to SK Biopharm, this would suggest about 4.1 trillion won in ADDITIONAL value due to SK Biopharm.
In other words, if the bankers' initial value for SK Biopharm is 3.8 trillion won, this could be implying that the bankers' valuation is too low and that there could be an additional upside of more than 100% or an implied value of nearly 8 trillion won (close to 100,000 won per share) could be what the market is implying could be for SK Biopharm shares. 
</div>We are including SK Biopharm in our model portfolio. Even at revised up IPO price levels, we think there could a sizeable upside and we like the company's business prospects going forward.

In this insight, we provide a valuation analysis of SK Biopharmaceuticals (BIO SK).Bullish Case Valuation - If we take a bullish case valuation scenario (for example, assuming the company is able to double its market share from the base case of 462 billion won for Cenobamate to 923 billion won, this would suggest the company's total pipeline market size to increase from 660 billion won to 1.1 trillion won. Applying the same 7.2x EV/pipeline multiple, this would suggest an EV of 8.1 trillion won or implied market cap of 8.0 trillion won (102,000 won per share in implied price).We can also use the recent share price movement of SK Holdings (034730 KS) as a guide to the potential implied market cap of SK Biopharm by backtracking the increase in the market cap of SK Holdings in the past few weeks. 
Although SK Holdings has numerous moving parts (including its holdings in SK Telecom and SK Innovation), clearly the dominant factor impacting SK Holdings has been SK Biopharm. If we take the case that about half of the increase in the value of SK Holdings since 19 May has been due to SK Biopharm, this would suggest about 4.1 trillion won in ADDITIONAL value due to SK Biopharm.
In other words, if the bankers' initial value for SK Biopharm is 3.8 trillion won, this could be implying that the bankers' valuation is too low and that there could be an additional upside of more than 100% or an implied value of nearly 8 trillion won (close to 100,000 won per share) could be what the market is implying could be for SK Biopharm shares. 
We are including SK Biopharm in our model portfolio. Even at revised up IPO price levels, we think there could a sizeable upside and we like the company's business prospects going forward.

SK Biopharm Valuation Analysis (What Is the Market Implying from SK Holdings?)

<div class="content-highlight">
<a href="https://www.smartkarma.com/entities/sk-biopharmaceuticals-co-ltd" target="_blank" data-smartkarma-citation="entities:28966" rel="noopener">SK Biopharmaceuticals (BIO SK)</a> is getting ready to complete an IPO in the Korean stock market in June. The SK Biopharm will be one of the biggest IPOs in the Korean stock market in 2020. Established in 1993, SK Biopharm has spearheaded the new drug development activities within the SK Group. According to the bankers' valuation, the expected market cap at the IPO is between 2.8 trillion won to 3.8 trillion won.
The IPO price range is from 36,000 won to 49,000 won and the IPO amount to be raised is from 705 billion won to 959 billion won. The book-building from the institutional investors will be from June 17th to 18th and the listing is expected to be in late June. The lead underwriters of this IPO include NH Investment &amp; Securities and Citi Global Markets. The joint book-runners include Morgan Stanley and Korea Investment &amp; Securities. 
To value SK Biopharm, the bankers took three major drugs made by the company including Cenobamate, Solriamfetol, and Carisbamate. The bankers then took the expected market size of each of these drugs and combined them which totaled 660.1 billion won. Then the EV/Pipeline multiple of 7.2x was applied, which resulted in an implied EV of 4.8 trillion won. After subtracting net debt, the implied market cap of SK Biopharm was 4.7 trillion won or 59,792 won per share. After applying IPO discount rates of 18.05% - 39.79%, this resulted in the IPO price range of 36,000 won to 49,000 won. 
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SK Biopharmaceuticals (BIO SK) is getting ready to complete an IPO in the Korean stock market in June. The SK Biopharm will be one of the biggest IPOs in the Korean stock market in 2020. Established in 1993, SK Biopharm has spearheaded the new drug development activities within the SK Group. According to the bankers' valuation, the expected market cap at the IPO is between 2.8 trillion won to 3.8 trillion won.
The IPO price range is from 36,000 won to 49,000 won and the IPO amount to be raised is from 705 billion won to 959 billion won. The book-building from the institutional investors will be from June 17th to 18th and the listing is expected to be in late June. The lead underwriters of this IPO include NH Investment &amp; Securities and Citi Global Markets. The joint book-runners include Morgan Stanley and Korea Investment &amp; Securities. 
To value SK Biopharm, the bankers took three major drugs made by the company including Cenobamate, Solriamfetol, and Carisbamate. The bankers then took the expected market size of each of these drugs and combined them which totaled 660.1 billion won. Then the EV/Pipeline multiple of 7.2x was applied, which resulted in an implied EV of 4.8 trillion won. After subtracting net debt, the implied market cap of SK Biopharm was 4.7 trillion won or 59,792 won per share. After applying IPO discount rates of 18.05% - 39.79%, this resulted in the IPO price range of 36,000 won to 49,000 won. 


United States

Zogenix, Inc. is a specialty pharmaceutical company with proprietary product candidates in late-stage development for the treatment of central nervous system disorders and pain.  The Company's products candidates include a product that enables needle-free subcutaneous delivery of sumatriptan for the treatment of acute migraine.

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Zogenix Inc (ZGNX US)

SK Biopharm Valuation Analysis (What Is the Market Implying from SK Holdings?)

In this insight, we provide a valuation analysis of SK Biopharmaceuticals (BIO SK).Bullish Case Valuation - If we take a bullish case valuation...

Douglas Kim

SK Biopharm IPO Preview

SK Biopharmaceuticals (BIO SK) is getting ready to complete an IPO in the Korean stock market in June. The SK Biopharm will be one of the biggest...

Douglas Kim

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